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Avis Expands Zipcar Services

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Zipcar Inc., a wholly-owned subsidiary of global vehicle rental giant, Avis Budget Group Inc. (CAR - Analyst Report), yesterday announced the expansion of its car sharing services in the City of Lakes, Minneapolis. This implies that Zipcar’s services will be now available in 21 major metropolitan cities.

Though the company has its presence in the city since 2005, its services were available only to the students and staff of University of Minnesota, and in other nearby vicinities. However, the recent development will provide ample opportunities to Minneapolis inhabitants to avail Zipcar’s all-purpose car sharing services. The company will charge its members $8.75 on an hourly basis or $72.00 for 24 hours.

Currently, this Avis Budget subsidiary intends to commence its operations in the city by positioning 40 vehicles at the most suitable locations including Dinkytown, Downtown, Loring Park, Northeast, North Loop and Seven Corners. Additionally, the company is in talks with City of Minneapolis officials to set up on-street parking spots. It also intends to expand its operations in other major areas of the city as well as in St. Paul.

Avis Budget, which competes with JTH Holding, Inc. (TAX - Snapshot Report), acquired Zipcar in Jan 2013 for a total value of $500 million. Following the completion of acquisition, Avis Budget has been aggressively expanding Zipcar’s services at various new locations. Earlier this month, Avis Budget expanded Zipcar’s airport services in the North American continent by starting its operations at 8 new locations.

In the United States alone, car sharing is currently a lucrative business worth nearly $400 million and is rapidly advancing in other parts of the world. With over 760,000 members, Zipcar enjoys presence in 21 major cities of the U.S., Canada and Europe.

We believe that the acquisition of Zipcar has facilitated Avis Budget to extend its offerings from car rental to car sharing, and has helped it compete better with rivals such as United Rentals Inc. (URI - Snapshot Report) and Hertz Global Holdings Inc. (HTZ - Snapshot Report). The latter has its own car sharing service, Hertz On Demand.

Avis Budget, which currently carries a Zacks Rank #2 (Buy), expects the acquisition to generate an annual synergy of $50–70 million. Zipcar is engaged in operating a car sharing network and providing self-service vehicles to members located in reserved parking spaces throughout the neighborhoods where they live and work. The company's vehicles are available for use through its reservation system accessible by phone, the Internet or wireless mobile devices.

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